Midterm 1

Question 1

Agency/fair share fees:

Answer 1

As part of an employee’s union-bargained, non-union members must contribute money to the union. This is because non-union employees often benefit from the collective bargaining efforts employed by the union. Fair share fees are the amounts of money paid by nonunion members of the bargaining unit to cover the union’s cost of representing them

as part of your employment contract, you must pay union
dues. Banned in Right-to-Work states and banned for
public sector unions by Supreme Court in 2018. These
fees exist to strengthen union membership and presence in industries. As part of an employee’s union-bargained, non-union members must contribute money to
the union. This is because non-union employees often
benefit from the collective bargaining efforts employed by
the union. Fair share fees are the amounts of money paid
by nonunion members of the bargaining unit to cover the
union’s cost of representing them

Question 2

American Federation of Labor (AFL):

Answer 2

Federation of labor unions in the United States founded in 1886. Main principles included craft unionism, economic struggle, and collective bargaining. AFL had a merger with Congress of Industrial Organizations (CIO) in 1955.

The original largest federation of labor unions in the US,
founded on December 8, 1886, composed of skilled/artisan workers primarily. Excluded unions with high percentage of minority workers unfortunately. Their main principles included craft unionism, economic struggle, and
collective bargaining. AFL had a merger with the Congress
of Industrial Organizations (CIO) in 1955.

Question 3

At-will employment:

Answer 3

Legal arrangement in the U.S. that allows employers to fire employees at any time for any reason, as long as the reason is not illegal (ex: firing because of an employee’s race, religion, or sexuality). Most other wealthy countries do not have at-will employment.

Question 4

Bronfenbrenner’s argument about employer opposition to union organizing:

Answer 4

The overwhelming majority of U.S. employers are willing to use a broad arsenal of legal and illegal tactics to interfere with the rights of workers to organize (threats, interrogation, surveillance, harassment. There is a lack of punitive damages or criminal charges for repeat offenders. Bronfenbenner argues that reforms, including the Employee Free Choice Act (EFCA) would provide a means to streamline the process of reporting violations and offer more substantive penalties for egregious employer violations.

Question 5

Captive audience meeting:

Answer 5

A mandatory meeting during working hours, organized by an employer with the purpose of discouraging employees from organizing or joining a labor union. Captive audience meetings are legal in the US under the National Labor Relations Act of 1935 (NLRA).

Question 6

CEO pay/compensation:

Answer 6

CEOs make 312 times more than typical workers. The ratio of CEO pay to worker pay has increased over time. Middle-class wages have been stagnant, and have only been up 6% since 1979.

Question 7

Closed shop:

Answer 7

Notion that as part of your employment contract, you must join the union. This practice has been outlawed by the Taft-Hartley Act of 1947.

Question 8

Coase’s theory of the firm:

Answer 8

Coase’s theory of the firm is based upon the idea that firms are a direct response to the high cost of using markets. He argued that it is often cheaper to direct tasks via salaried employees than to negotiate and enforce separate contracts for every transaction.

Firms exist to reduce transaction costs (costs of info,
bargaining, and enforcing an economic exchange)
Firms exist because organizational hierarchy is often more
efficient at coordinating activity than transactions are.
Coase also argued that it is often cheaper to direct tasks
via salaried employees than to negotiate and enforce separate contracts for every transaction.

Question 9

Codetermination:

Answer 9

Workers get to select member(s) for the company’s board of directors. Require a company to consult with worker representatives before making a decision that would affect workers, such as their scheduling or pay. This allows workers to have a say in company decisions

Question 10

Cold War business-labor compromise:

Answer 10

The informal agreement between organized labor, businesses, and the U.S. government that emerged in the early cold-war years. Compromise created stable relationships, and shaped the American economy in that era. Compromise included rising wages and benefits for workers (creating more productivity), more peace/economic security (no strikes for change). US gov played a role to encourage compromise: Taft-Hartley Act (1947), restricted union activities but also afforded them right for collective bargaining

Question 11

Collective bargaining:

Answer 11

Process of negotiation between employers and groups of workers (through their union, hence “collective”) to determine terms of employment.

a negotiation process between a group of employees and
their employer to establish agreements over wages, benefits, and working conditions
Different in the US than in europe.

Question 12

Commodity:

Answer 12

A commodity is a basic good that is used as an input in the production of goods and services. A commodity has ‘use value,’ determined by its use, as well as an ‘exchange value,’ determined by how much labor it requires to make.

has a (1) use value (determined by its use) and (2) exchange value (determined by how much labor it requires
to make.
Basic good that is used as an input in the production of
goods and services.

Question 13

Congress of Industrial Organizations (CIO):

Answer 13

The CIO was a federation of unions that organized workers in industrial unions in the United States and Canada from ~1935 to 1955. Its creation was largely a response to the American Federation of Labor’s (AFL) unwillingness to support unskilled/semi-skilled factory workers. The CIO’s strategy was social movement unionism, as they combined efforts such as the Civil Rights Movement with movements for more labor rights.

The CIO was a federation of united States and Canada
from ~1935 to 1955. Its creation was largely a response
to the American Federation of Labor’s (AFL) unwillingness to support unskilled/semi-skilled factory workers. The
CIO’s strategy was social movement unionism, as they
combined efforts such as the Civil Rights Movement with
movements for more labor rights

Question 14

Dynarski’s argument about the effect of unions on inequality:

Answer 14

According to Dynarski, unions combat the effects of inequality in a multitude of ways. For one, they help to increase wages for low-skilled union members, many of whom hail from underprivileged communities. She claims to have seen first hand how the unionization of secretaries and library workers at universities yielded these predominantly female workers higher wages, more generous pensions, and paid maternity leave. Thus, the gap between the rich and the poor will continue to widen if unions continue to weaken

Question 15

Economic inequality in the US vs. other wealthy countries:

Answer 15

Wealth inequality in the United States is higher than it is in almost any other developed nation around the world. In other words, the richest 1% in the U.S. own a larger share of America’s wealth than in most other wealthy nations. This has been exacerbated, in no small part, by a variety of factors including historical racial segregation, a stagnating minimum wage, and the waning power of labor unions.

Question 16

Excludable vs. non-excludable (public or collective) goods:

Answer 16

The ability (or inability) to prevent someone from accessing a good or service. Excludable, someone can be prevented from using (ex. If they don’t pay for a good, like clothing items). Non-excludable, can’t prevent someone from using it, regardless of contribution to it (ex. Public parks).

Unions can make some parts of their activities excludable
in order to incentivize union participation, disincentivize
free riding

Question 17

Financial Crisis of 2008 & Great Recession:

Answer 17

Linked economic downturns. 2008 financial crisis → collapse of housing market, failure of financial institutions, led to widespread loss of trust in financial systems resulting in economic collapse. Great Recession → severe global economic downturn that followed the financial crisis (late 2007 to mid-2009). Key characteristics: negative GDP growth, massive job loss, housing market collapse, global recession

Question 18

Fixed capital:

Answer 18

The portion of total capital outlay of a business invested in physical assets (ex: factories, oven, vehicles, machinery) that stay in the business almost permanently, or for more than one accounting period. (labor theory of value → profit = exchange value of commodity - exchange value of labor (wages) - fixed capital)

Question 19

Ghent system:

Answer 19

Welfare programs that are administered by unions, not the government, which typically tend to be unemployment benefits. (Like food stamps)

Question 20

Hacker and Pierson’s “Winner Take All” argument about inequality:

Answer 20

Hacker and Pierson argue that the growing ubiquity of “Winner Take All” inequality in America can be attributed primarily to three crucial factors, those being that economic gains have been highly concentrated at the very top of the wealth pool, these disproportionate gains have been growing without interruption or signs of weakening since the early 1980s, and that these gains have resulted in very few “trickle-down” benefits for the rest of the population.

Question 21

“Hard Hat” Riot of 1970:

Answer 21

The “Hard Hat” Riot occurred in New York City when a group of construction workers attacked a slightly larger group of demonstrators, affiliated with the student strike of 1970, who were marching for the victims of the Kent State shootings. It was a clash between ‘hard hats’ and ‘hippies,’ with the construction workers chanting things like “America, love it or leave it” and the demonstrators chanting “Peace now.”

following Kent State massacre, college students organized in mass to protest the killings and the Vietnam war.
Notably, college students gathered in New York outside
the UN. These demonstrators met resistance from a small
group of construction workers who opposed their values,
leading to a scuffle.

This showed the spectrum of views held by laborers, some
of which leaned more conservative

Question 22

Health, retirement, and other fringe benefits:

Answer 22

collectively bargained contracts have better health and
retirement benefits. Moreover, union workers earn ~24%
more on average

Fringe benefits are benefits that supplement an employee’s normal salary, and despite the name, they are what most of us would call regular employee benefits, such as health insurance, workers’ compensation, retirement plans, and family/medical leave. Unions help improve fringe benefits for workers in many ways (Ex: Unionized workers are more likely to have employer-provided health insurance than their non-unionized counterparts + unionized workers are more likely to receive paid leave, including paid sick days)

Question 23

How to form a union under NLRA system:

Answer 23

Under the system established by the National Labor Relations Act, workers wishing to form a union must first file a petition with the National Labor Relations Board (NLRB) with signatures of at least 30% of workers in favor of unionizing. Then, the employer and the proposed union will hold a card check election, and the workplace becomes unionized if a majority of workers vote in favor of the union.

Question 24

Jensen and Meckling’s and/or Friedman’s Theory of the Firm:

Answer 24

In a given firm, shareholders (owners) and managers (CEOs) want to maximize their profits, and stakeholders (workers, communities, etc.) are nuisances standing in the way of profit maximization. In other words, since shareholders form the backbone of firms, a company’s only social responsibility should be to increase profits for said shareholders while of course obeying the law and competing freely within the market.

Shareholders (owners) want to maximize value of firm,
managers (CEOs) want to maximize their pay, and Stakeholders (workers) are nuisances
Maximizing shareholder value (without regard for workers/other stakeholders) is best for everyone
Corporations should pay CEOs for performance to align
their incentives with shareholders

Question 25

Knights of Labor:

Answer 25

Arguably the first important national labor organization in the United States, the Knights of Labor were active during America’s Gilded Age. It was mostly skilled/artisan workers, and they fought for an eight-hour workday and against exploitative child labor. However, members were often racist and anti-immigrant, so it was composed primarily of white Americans.

Question 26

Labor strikes pre-NLRA (e.g., in 19th century):

Answer 26

Haymarket Riot (1886):
A violent confrontation between police and labor protesters in Chicago; it served as a rallying cry for labor activists and was symbolic of the global struggle for workers’ rights at the time

Homestead Strike (1892):
A bloody confrontation between discharged workers from the Carnegie Steel Company in Pennsylvania and a hired security team; whole debacle helped turn public opinion against using hired help (private security) during labor disputes

Pullman Strike (1894):
Involved some 250,000 railroad workers across ~20 railroads, and it represented the growing strength of the labor movement in America; although at the time protests were violently put down and striking workers lost out on wages, this strike served the long-term effect of improving working conditions and endorsing collective bargaining as a valid method for workers and managers to negotiate

Question 27

Marx’s Labor Theory of Value:

Answer 27

The value of a good or service is determined by the amount of labor required to produce it, rather than its market price or the materials used → essentially, the more labor put into a product, the higher its value according to this theory, which is a central pillar of Marxist economics and serves as a critique of capitalist exploitation of workers by appropriating the surplus value they create through their labor

Capitalist (shareholders) reinvest profit into capital (e.g.
better technology), which drives down the exchange value
of labor
Value is produced by labor
A commodity has a use value (determined by its use)
and an exchange value (determined by how much labor
it requires to make)

Question 28

McCarthyism and the labor movement:

Answer 28

On February 15th, 1950, McCarthyism took over the Congress of Industrial Organizations (CIO), as the federation’s right-wing leadership caved to pressure from the House Un-American Activities Committee (HUAC) and initiated a wave of expulsion of left-led unions. Five years later, the CIO merged with the AFL to form the AFL-CIO, which for decades afterward was led by a number of pro-business figures (after all of the presumed communists had been removed from the CIO)

Senator McCarthy claimed communists had infiltrated the
State Department in February 1950. As a result, anti-union
fervor increased and union leaders were arrested due
to connections with the Communist party. Unions purged
communist due to this mentality, harming U.S. Democracy
and labor unions

Question 29

National Labor Relations Act (NLRA) of 1935:

Answer 29

created a system to forming unions. (1) Union must file a
petition with the National Labor Relations Board (NLRB)
with signatures from 30% of workers and (2) the employer
and union have a card check election. The workplace is
unionized if the union wins a majority of workers

Guaranteed employees the right to self-organization, to form, join, or assist labor organizations, and to bargain collectively through representatives of their choosing. In order to enforce and maintain such rights, the act included provisions for the National Labor Relations Board (NLRB) to arbitrate deadlocked labor-management disputes, guarantee democratic union elections, and penalize unfair labor practices by employers

Question 30

PATCO strike:

Answer 30

PATCO strike:
In August 1981, over 12,000 members of the Professional Air Traffic Controllers Organization (PATCO) walked off the job after contract negotiations with the Federal Aviation Administration (FAA) broke down. President Ronald Reagan ordered them to return to work, and after 48 hours fired those who did not (over 11,000 workers were fired). Represents a breakdown in labor relations between unions and corporations/government.

They were a public sector union and Reagan fired workers
that were striking, signaled policy shift towards employers
that the Reagan administration would not be strict on
employers regarding union busting activities.

Question 31

Policy explanations for economic inequality in the US:

Answer 31

Some policy explanations for economic inequality in the U.S. include tax policies that favor wealthy Americans while jeopardizing those in the middle-and-lower classes and the ineffectiveness of social security programs (which, if effective, are meant to narrow the gap between the rich & poor in America)

Question 32

Profit:

Answer 32

Profit is the surplus value created by labor (Profit = exchange value of commodity - exchange value of labor (wages) - fixed capital (manufacturing building, technology needed to create commodity, etc.)

(e.g. the exchange value of bread = $3. Fixed capital =
building, bread oven, etc)

Question 33

Red scare and the US labor movement:

Answer 33

During the Red Scare, paranoid Americans became suspicious of anything even vaguely leftist, which put unions under the microscope, specifically the United Electrical, Radio, and Machine Workers Union, which was considered as having one of the heaviest concentrations of communist leaders and members. As a result, labor leaders adamantly conducted searches within unions to purge suspected and militant communist allies, and anti-communist union leaders declared war on their leftist counterparts

Question 34

Right-to-Work Laws:

Answer 34

Right-to-work laws are state-level regulations that allow employees to choose whether to join a union or pay union dues at their workplace → these laws protect workers from being required to join a union or pay dues to a union they don’t want to be affiliated with, and these laws hurt unions by limiting their funding via membership dues

state laws that prohibit union security agreements between employers and labor unions. This means employees
in unionized workplaces cannot negotiate employment
contracts that require all benefiting members contribute to
the costs of representation (union dues)

Question 35

Sectoral bargaining:

Answer 35

system where unions are organized by industry, not workplace by workplace. A type of collective bargaining that
provides union contract coverage for most/all workers
in a particular sector (e.g. fast food workers, writers,
auto-workers)

Sectoral bargaining is a system where unions are organized by industry, not on a workplace-by-workplace basis (Ex: In Sweden, collective bargaining takes place at 3 levels – nationally for all industries, nationally for specific industries, and locally amongst individual companies)

Question 36

Shareholders:

Answer 36

owners who want to maximize the value of a given firm.
Corporations aim to maximize shareholder value without
regard for workers/other stakeholders

Shareholders are people/institutions that own shares of a given company’s stock, making them ‘owners’ of that company. Companies often act in the interests of their shareholders, since they are the owners of the company and they are often interested in maximizing their own profits

Question 37

Skill-biased technological change (as an explanation for inequality):

Answer 37

Skill-biased technological change (SBTC) is a hypothesis that explains the rise in wage inequality in the United States since the 1970s by linking it to the development of new technologies, such as the personal computer and the internet → the theory is that these technologies have changed tasks and employment patterns, increasing the demand for educated workers and leading to higher wages for those workers while decreasing the demand (and thus pay) for unskilled laborers

Question 38

Social mobility:

Answer 38

the ability for individuals/groups through a system of social
hierarchy/class system. The United States has extremely
low social mobility, with workers/lower classes largely being unable to advance significantly in pursuits of higher
economic and social status

Refers to the shift in an individual’s social status from one status to another → types of social mobility shifts include horizontal mobility (change in occupation but overall social standing remains unchanged), vertical mobility (change in occupational/political status of a person that causes a change in their societal position), upward mobility (when a person moves from a lower position in society to a higher one), downward mobility, etc.

Question 39

Solving collective action problems (i.e., incentivizing collective action):

Answer 39

Appealing to emotions/morality/duty
Offering selective incentives or make goods excludable
(e.g. you get a cookie if you clean the house)
Monitoring, enforcement, coercion (e.g. you get kicked out
of house if you don’t contribute to cleaning)

There are many ways to try and solve collective action problems, including appeals to emotion/duty (why many people join the military), offering selective incentives/excludable goods (Ex: you must contribute to the union if you take the job), and enforcement/coercion (Ex: you go to jail if you don’t pay taxes)

Question 40

Three Faces of Power:

Answer 40

When A and B want different things - A’s ability to make B do what they want
Agenda-setting: A’s ability to get their proposal considered (ex: civil rights kept off Congress’ agenda until 1950s-60s
Ideology: A’s ability to influence B’s own preferences and goals (ex: workers don’t want higher pay because they feel inferior; wives who don’t want autonomy

Question 41

Tragedy of the commons:

Answer 41

Using too much of a collective good. When individuals
over-exploit a shared resource, leading to its depletion and
harming everyone who relies on it, even those who act
responsibly and don’t over-exploit.

Can be described as the flipside of the free rider problem, and refers to the problem that arises when too much of a collective good is used by a group. Example: clean water. Thought process is that if everyone views their use of a collective good as insignificant (Ex: I’m just one person, it won’t matter) the good will become exhausted and no one will enjoy it.

Question 42

Transaction costs:

Answer 42

Cost of information, bargaining, and enforcing an economic exchange. In other words, it is any expense incurred when conducting an economic transaction. (ex: when purchasing something

Question 43

Union dues:

Answer 43

union members’ financial contribution to the operation
of the union. Important due to providing the resources
necessary for unions to organize and bargain for better
conditions. benefits of bargaining typically far outweigh
cost of these dues.

Regular payments made by workers in a union to the union to support its activities and operations. Significant in collective bargaining but creates a cost that can incentivize free-riding.

Question 44

Union wage premium:

Answer 44

union workers earn ~24% more on average. Collectively
bargained contracts have better health and retirement
benefits. Security and representation if your employer violates your contract or discriminates against you

The difference in wages between union workers and non union workers (~17% for male union workers, ~9% for female union workers). Union workers on average have higher wages, but that could also be attributed to other factors (geography, minimum wage policies, etc).

Question 45

Unions’ (legal) representation of workers:

Answer 45

Unions represent their members in disputes with their
management. For example, contract violations, discrimination

Much of what unions do today involves representing their members in disputes with management, such as contract violations or instances of workplace/firing discrimination. Unions have the duty of representing all employees fairly and in good faith

Question 46

Voters as an explanation for inequality in the US:

Answer 46

Argument that voters are partially responsible for inequality under the notion that they do not vote for anti-inequality initiatives/don’t prioritize them, and that the national government typically only passes policies when they are widely popular. This argument is not entirely valid, as large majorities still support universal health care, spending on the poor, oppose Wall Street, etc.

Question 47

Voters as an explanation for inequality in the US:

Answer 47

Argument that voters are partially responsible for inequality under the notion that they do not vote for anti-inequality initiatives/don’t prioritize them, and that the national government typically only passes policies when they are widely popular. This argument is not entirely valid, as large majorities still support universal health care, spending on the poor, oppose Wall Street, etc.

Question 48

Taft-Hartley Act
of 1947:

Answer 48

Permitted employers to campaign against unions during
NLRB elections
Banned secondary boycotts
Established no supervisory personnel in unions
Banned closed shop agreements/States can ban union
shop (“Right to Work” Laws)
Purged suspected communists